: Logistics & Industrial Market Snapshot Q2 2019

Delfi Real Estate | 1 | Research & Analytics Desk | 2Q2019

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Delfi Real Estate | 2 | Research & Analytics Desk | 2Q2019

1. Greek Economy Overview demand and improved competitiveness. Investment The end of the long fiscal adjustment marked by the and private consumption are expected to recover as completion of the third program in August 2018 confidence rebuilds, following improved fiscal could inaugurate a return to economic normality in credibility. The maintained high excess capacity will Greece. In the aftermath of the global financial crisis limit price and wage pressures. of 2008 during which Greece sank into recession recording negative GDP growth for eight 1.2. Greece broke its new record in tourist arrivals during 2018 reaching 33million arrivals consecutive years (2009 – 2016), the economy According to the Bank of Greece, travel revenues seems to be stabilising and bouncing back towards totalled €15.8bn, up 9.7% relative to the same period a more sustainable trajectory, assuming that the of 2017. Visitor flows through airports increased by actions agreed in the third review will be 13.6%, while visitor flows through road border- implemented and the Greek government will bring crossing points increased by 5.8%. In addition, the about the reforms that are designed to attract number of visitors from Germany increased by foreign investment. Market appetite has been tested 18.4% to 4,343 thousand, as did the number of with the issue of a 5 Year Government Fixed Income visitors from France, by 7.0% to 1,511 thousand. Security earlier this year. The 3.45% coupon issue According to data from International Airport, was oversubscribed, and Greece drew in 2018, 24.14 million passengers travelled through approximately 2.5 billion euros, while there are the airport, an increase of 2.4 million compared to plans for issuing a new 10-year benchmark bond 2017. later this year. 1.3. In August 2018, Greece successfully concludes its GDP growth, Unemployment and Inflation in Greece European Stability Mechanism (ESM) program % GDP growth Inflation Unemployment rate (European Commission) 30 Greece exited its three-year ESM financial 20 assistance programme successfully in August 2018.

10 This follows the disbursement of €61.9 billion by the ESM over three years in support of macroeconomic 0 adjustment and bank recapitalisation. -10 1.4. Foreign Direct Investment Inflows reached -20

EUR3.5bn in 2018, an increase of 9% YoY

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: IMF, edited by Delfi Partners & Co. 1.4.1. Golden Visa Scheme In 2013, the Greek government launched the Golden 1.1. GDP growth is expected to be 2.2% by YE2020 Visa program whereby investors buying property (IMF) The government’s plan to revive the construction valued at minimum €250,000 are eligible for a sector culminated into schemes designed to attract residence permit. Since the launch of the program foreign investments. The years of 2016 and 2017 and up to the end of 2018, more than 3,620 marked a new era for the real estate market in residence permits have been granted to Greece. Strong macroeconomic performance investors/property owners. More than 9,756 resulted in renewed confidence and trust for the residence permits have been granted to country as an investment destination. In 2017, the investors/property owners and their families for total first signs of economic recovery were noted with an investments in excess of €1.5bn in Real Estate. increase of 1,5% in the Gross Domestic Product Residence Permits Nationalities (GDP), an upward trend that was strengthened 5,367 during 2018 marking a 2.2% increase. Inflation

remains in the neighbourhood of 0.8% and the 1,028 1,012 336 658 European Commission expects it to reach 1.3% by 325 285 200 189 182 174 2020. According to the International Monetary Fund, GDP growth is projected to rise to 2.4% in 2019 and 2.2% in 2020. The main driver of growth is attributed Source: Enterprise Greece, edited by Delfi Partners & Co. to exports, taking advantage of rising external

Delfi Real Estate | 3 | Research & Analytics Desk | 2Q2019

1.5. Capital controls were lifted in September 2018 Rents for Prime Properties - Offices Sector following three years of economic recovery Syntagma CBD Broad Kifisias Av. Sygrou Av. Mesogeion Av. Greece raised the monthly limit of cash that can be €/ SQM 35.0 withdrawn from bank accounts to €5,000 from 30.0

€2,300 euros as part of measures to ease capital 25.0 controls imposed in 2015. Athens first imposed 20.0 capital controls in the summer of 2015 aiming to 15.0 restrain excess withdrawals from the banking system 10.0

5.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Delfi Real Estate Decentralized Authorities issuing permits to investors/property owners 3. Delfi Property Price Index 1.143 968 Greece is strategically positioned at the crossroad of 644 three continents (Europe, Asia, Africa) and has been 198 139 120 197 64 60 51 36 since early antiquity, a strategic node for transportation in the greater region. Due to Greece’s advantageous location and the Source: Enterprise Greece, edited by Delfi Partners & Co. strategic position of its ports, it can offer competitive during the debt crisis that led to its third financial freight costs. Furthermore, Greek ship-owners bailout since 2010. The country’s rapid return to control the world’s largest merchant fleet and due to international financial markets marked a significantly Greece’s manufacturing and maritime tradition, positive step towards restoring confidence and availability of know-how and skilled labour is in credibility. abundance.

2. Real Estate Market Overview 3.1 Logistics Market Overview The real estate market is positively affected by Today, the Logistics industry represents 10.8% of strong signs of stabilisation in the Greek economy as GDP while maintaining a significant margin with well as anticipated return to growth in the coming potential to expand even further. The logistics sector years. Following nine years of declining real estate in Greece includes a number of global 3PL (3rd Party prices, the cycle is now exhibiting strong signs of a Logistics) providers specialised in managing goods turnaround. There has been strong demand for (storage, preparation and distribution) and many prime, income producing assets from international small-medium enterprises (SMEs) offering a range of investors. Real Estate Investment Companies services. Kuhne & Nagel, DHL, Schenker, Geodis, (“REIC”) have been very active in Greece with 8 Panalpina and Express are currently operating in REICs currently registered with the Hellenic Capital Greece. Hellenic Federation of Industries (SEV) has Market Commission while more are in the pipeline. been recently created with the aim to improve As part of further expansion, Eurobank Ergasias collaboration between logistics providers and the announced a merger with Grivalia Properties. This rest of the Greek economy. merger enables the bank to achieve the highest total capital ratio in Greece and accelerate the reduction Important action is also made by the Greek of its problematic exposures (NPEs). Growing Government for the creation of logistics hubs that will demand in the “Golden Visa” scheme also positively enable the growth of commercial transport in contributes to the real estate market. Greece. More specifically, law 4302/2014 enacted in 2017, enabled the publication of the relevant With regards to its portfolio, Grivalia’s Office decision in the Government Gazette. Among other segment generated 34% of the total rental income in issues, it defines procedures related to the creation the fiscal year of 2018, ranking roughly 3% above the of logistics hubs in the country that will allow the second largest segment, retail. sector to grow and expand, contributing even more to the overall economy.

Delfi Real Estate | 4 | Research & Analytics Desk | 2Q2019

The main logistics locations in Greece are divided 10.25% - 10.75% gross yield into the logistics property markets (that are ▪ Prime logistics facilities in Thessaloniki: mainly located at the entrance of the city of Athens €1.50 - €2.25 per m2 per month and the port city of ) and Thessaloniki 11.00% - 12.00% gross yield logistics property markets, all of which have ▪ Non-Prime logistics facilities: immediate access to both ports and international €1.00 - €1.50 per m2 per month motorways. 12.00% - 13.00% gross yield 3.2. Attica Logistics Market ▪ Athens North (Metamorfosi, Likovrisi, 5. Industrial rental prices / yields , Agios Stefanos, Krioneri) As the economic crisis hit Greece the impact was ▪ Mesogeia, Attica East (Markopoulo, Koropi, significant, with a large drop in rent prices. Spata, Peania) Specifically, there was almost 40% reduction in ▪ Piraeus (Drapetsona, , Agios I. prime industrial areas in Attica, from 6.5€/sqm at Rentis) 2007 in 4€/sqm at 2014. After that, prices have been ▪ Attica West (Aspropirgos, Magoula, roughly stable for industrial properties with good Mandra, Elefsina) prospects of growth assuming that the economy ▪ Viotia, Attica North (Inofita, Schimatary and continues to grow with strong infrastructure Avlonas) investing.

3.3. Thessaloniki Logistics Market: Industrial Prime Rent(€/Sqm) ▪ Sindos 8.00 ▪ Agios Athanasios 6.00 ▪ Kalochori 4.00 ▪ Oreokastro 2.00

Also, there are multiple industrial zones in Greece. 0.00

2011 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 According to the Impact Study of the Hellenic Federation 2007 of Industries (SEV), businesses that operate within Ag.Stefanos Aspropirgos organized business infrastructures ensure lower Koropi Elefsina installation costs up to 25%, savings in street lighting and cleaning costs up to 42%, a significant reduction in Source: Delfi Real Estate real estate tax of up to € 54,000, a significant reduction Industrial Yields in administrative costs, as they are exempt from the 15.00% obligation to install and renew it, and are encouraged to export and innovate. 10.00% 5.00% 4. Rent / yield market The logistics property market, which closely follows 0.00% the growth pattern of the overall Greek economy, expanded considerably during the period 2005- 2008, driving prime rents from €4.00m2/month in Yield 2004 to as high as €6.00m2/month in 2008 for high quality logistics spaces in certain areas. By 2009, the Source: Delfi Real Estate economic crisis had a substantial effect on the Greece's financial situation also had a major impact logistics property market that noted a significant fall on industrial yields, as reflected in the chart above. in demand and decrease in prime rents to below 6. Transactions €1.00m2 per month in some cases. Increased The most recent notable transactions on the interest and limited supply led rents marginally industrial sector are: higher for prime properties in 2018. NBG Pangaea REIC acquired a building in ▪ Prime logistics facilities in Attica: in 2018 for €482 per m2: €3.00 - €3.75 per m2 per month

Delfi Real Estate | 5 | Research & Analytics Desk | 2Q2019

▪ €13.1m for 27,200m2 (9.2% gross yield), Grivalia REIC acquired two logistics properties in Aspropyrgos in 2015-2016 for €444 per m2: ▪ €5.9m for 13,000m2 (12.0% gross yield) ▪ €8.3m for 19,000m2 (11.5% gross yield) Jumbo acquired a building on the old National Road ‘Athens-Chalkida’ in 2014 for €411 per m2: ▪ €11.3m for 27,500m2 Secure Development & Investment Plc acquired a logistics complex in Attica West (leased by Kuehne & Nagel) in 2014 for €845 per m2:

▪ €15.0m for 17,756m2, (12.0% gross yield)

7. Summary New investments in infrastructure and several reforms assist in empowering the Country’s global position while the logistics property segment has entered an era of growth following numerous years of recession. The potential for Greece to become a major logistics, distribution and assembly hub for Europe has been recognized by major investors such as Chinese COSCO, which has heavily invested in the Piraeus port. Greek manufacturing and maritime tradition ensure the availability of skilled logistics and assembly employees for the staffing of local distribution centres. In this environment, Greece’s geographical position as a gateway between East and West render it highly attractive for investments in logistics and transport to take advantage of increasing trade flows in an efficient and cost-effective manner.

Delfi Real Estate | 6 | Research & Analytics Desk | 2Q2019

Research Team Details

Contact Details:

Contact details: Dr George Mountis [email protected] | DP Stefanos Pattichis, CFA Managing Partner [email protected] | DP (Greece, Cyprus, SEE) Senior Analyst (Greece, Cyprus)

Contact Details: Contact Details:

Theodore Delidimitropoulos Costas Zeniou [email protected] | DP [email protected] | DP Junior Analyst Director (Greece) (Greece, Cyprus)

Contact details: Contact Details:

Christos Nevsechirlioglou Panagiotis Chionas [email protected] | DP [email protected] | DP Junior Analyst Senior Analyst (Greece) (Greece, Cyprus)

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Delfi Real Estate | 7 | Research & Analytics Desk | 2Q2019